March 17, 2013 · 12:42 pm

The Argument for Better Access to AEDs

I recently took my very first First Aid course with CPR and AED certification for St. John’s ambulance and I was astounded to learn how effective Automatic External Defibrillators (AEDs) are at saving lives. In cases of cardiac arrest, an AED can double the rate of survival from an out-of-hospital cardiac arrest (Weisfeldt et. al.). In cases of cardiac arrest, every second counts. Defibrilation and CPR must be started as soon as possible to maximize the chances of survival and to maximize quality-of-life after a heart attack.

The most recent versions of AEDs are idiot-proof. You simply place the sticky pads on the follow the directions which are essentially put the pads on the casualties chest and press a couple of buttons. They can be used with little or no formal training. Furthermore, the risk of delivering an unwarranted shock is negligible since the systems are designed to only shock people with the two life threatening types of cardiac arrythmia.

Despite their life-saving efficacy, the American Heart Association only recommends that an AED be installed if their is a 1 in 5 chance per year that it may be used. Even as far back as 2003, at least one study found that this recommendation is far too restrictive (this study also included substantial training costs that authors believe may not be necessary).  Since 2003, costs have fallen solidifying the argument that AEDs should be placed in many public places.

Given the substantial benefit, why aren’t AEDs more available? There is little economic incentive for most heavily trafficked public spaces to have an AED. There is no responsibility for public organization to intervene in medical emergencies, and in many cases they may be worried about liability in the case that they misuse an AED. Consumers might decide to frequent public places and store that have AED access, but they don’t have the necessary information about the location and effectiveness of AEDs.

Overall, Canada and other governments should be looking into more ways to economically increase  the accessibility of AEDs. Government programs to increase AED access could greatly increase the survival rate of heart attacks in Canada. So far in Canada the government response has been limited. The federal government announced a $10 million program to provide AEDs at hockey rinks, but this ignores the multitude of other public places where AED access could save lives for relatively low cost. At the provincial level, only Manitoba has regulation requiring AEDs. Many major centres have AED programs, but rural areas – where EMS service is generally slower and AED access more valuable – lack the resources.

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December 3, 2012 · 4:55 pm

Why Egypt Could Fail

I’ve finally had a chance to read Why Nations Fail by Daron Acemoglu and James Robinson. It provides a useful tool for looking at the President Morsi’s attempt to centralize power in his own office could damage Egypt’s fragile economy.

In Why Nations Fail Daron Acemoglu and James Robinson reiterate throughout that politically inclusive institutions, strong economic institutions, and sustainable  economic growth go hand-in-hand. Their analysis reinforces how damaging it could be for Egypt’s president Morsi to centralize power in the president’s office.

Under military-dictator Mubarak, over half of all Egyptians lived on less than $2 a day, and economic wealth largely centralized by a tiny elite. However, political power was centralized and largely undisputed for decades. Acemoglu and Robinson argue that some modest economic growth can be created under politically-exclusive and economically-extractive institutions: dictators need a bit of an economy to have any wealth to extract. But, they are doomed to collapse as higher levels of opression and constant in-fighting among the elite lead to revolution. As a result of some modest economic reform, Egypt’s economy did experience moderate growth under Mubarak – GDP grew by about 5% per year – but the oppressive regime inevitably fell apart as the Arab Spring moved from Tunisia east. On January 25th, 2011 Mubarak’s oppressive presidency ended. So far, the revolution has brought no economic benefit to Egypt. The resulting political instability has stunted economic growth, and led to a sustained double-digit unemployment rate.

Now President Morsi’s attempt to centralize power in his own office will do little to stop the current political instability, and even worse would rapidly create a politically-exclusive, even authoritarian, regime mere months after Egypt’s democratic election. Certainly, centralizing power in the president’s office would increase in-fighting between the Muslim Brotherhood and the Egyptian army. Not to mention that regular Egyptians would also surely continue to fight to try and reverse the president’s new powers through increasingly intense demonstrations. It seems almost unimaginable that such a tactic could reduce political instability. However unlikely, even if Morsi’s constitution did create some political stability,  it seems that Egypt’s economy has already attained the maximum amount of economic growth it can under politically exclusive institutions.  Egypt needs to continue to move in the initial direction of the revolution – toward more politically inclusive institutions and more political stability – to attain anymore economic growth.

Given the current stagnant state of Egypt’s economy since the revolution in 2011, centralizing power in Morsi’s office could actually undo the moderate economic gains made under Mubarak by replacing a centralized, stable, politically exclusive regime with an unstable, politically exclusive regime. Without continued political reform, Egypt’s economy and Egyptians will continue to suffer.

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Aside

The Cost of Regulatory Opacity

The Canadian government’s recent blocking of the sale of Progress Energy Resources to Malaysian state-owned Petronas has raised calls to act on the vagueness of the “net benefit” test applied to mergers in Canada over $331 million. The lack of clear criteria for this net benefit test has serious economic implications for investment in Canada.

When Canada blocks a merger it creates costs and uncertainty for Canadian businesses.

The potentially unfounded, or at least unclear, blocking of a major merger limits potential competition for the sale of Canadian companies, reducing the value of Canadian companies and increasing investor uncertainty.

Fewer takeovers could damage Canada’s labour productivity. Mergers and takeovers create new more efficient organizations by eliminating duplicate positions or centralizing administration that can make the Canadian economy more productive.

The unfounded (or at least unspecified) rejection of major mergers could create a more hostile environment for Canadian businesses trying to merge with companies overseas. Foreign governments likely aren’t going to allow Canadian companies to reap the benefits of mergers when their companies cannot.

The net effect is that every time that the government intervenes in business actions like mergers, it reduces business investment.  In a paper from the Cato Institute – a libertarian think-tank – George Bittlingmayer estimated that every antitrust case brought against business in the U.S. reduced investment a staggering $1.7 billion. At least in the case of antitrust cases in the U.S. though, the justification of why the merger or other action was blocked is clearly laid out. In the case of antitrust lawsuits though, the final outcome of the case and why the merger or acquisition is stopped is clearly laid out. When mergers are stopped in Canada under the Investment Act, the effect on depressing investment is amplified because no public justification is given.

Ensuring that Canadians are protected from monopolies and potential security risks is critical, and certainly may justify stopping some mergers. However, a lack of clarity on how the Canadian government actually weighs these costs to the benefits of major mergers creates an uncertain business environment that stifles investment throughout the country.

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October 22, 2012 · 12:53 pm
June 7, 2012 · 12:03 pm

The Problem with Labour Moblity: Opportunity is not Enough

It is a well known fact that labour mobility is low in the E.U, despite the disparate strength of member countries’ economies. In fact, only 0.2% of EU citizens move to work in another country in any given year. Far lower than the 2% to 2.5% of Americans who change States in any given year.

Most commentators on Europe’s labour mobility looked at the practical barriers for EU citizens who are looking for work abroad: labour market regulation, employment taxes, cultural and language barriers. However, a 2010 study by the European Commission shows that most Europeans do not consider these to be the most significant barriers to moving.

The European Commission 2010 study on labour mobility shows that opportunity and economic hardship is not enough to make people move, nor are language or culture significant obstacles. First off, the recent economic hardship has correlated with a lower incentive for Europeans to move even within their own country. The number of Europeans who would move to a new region or country if they were unemployed fell from 66% to 48% between 2005 and 2009. Perversely, in Greece, the number of respondents who said they would move to a new country or region if they were unemployed fell from 67% to 38% in the same period.

The largest barriers to moving weren’t cultural or language. The top disincentives for moving abroad were leaving home, causing family distress, and leaving friends. Only 19% identified learning a new language as an obstacle to looking for work elsewhere.

Cultural barriers were very low on the list of practical difficulties that Europeans expected to encounter in working abroad. Only 16% of respondents identified cultural barriers as a possible practical impediment to looking for work abroad. And only 10% worried about getting their qualifications certified. Although language barriers were the number one challenge to working in another country, overall, only 10% to 20% of Europeans depending on the country expect that they would actually encounter any barriers to finding work.

Calls for eliminating labour restrictions within Europe would certainly help bring some balance to the European economy across regions, but it won’t be a panacea. Many European citizens are tied to their home countries through family or identity. Until there is a dramatic shift in attitudes toward working abroad (which is at least taking hold in younger, more educated generations), a lack of labour mobility will remain an impediment to the success and sustainability of the Euro.

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June 2, 2012 · 12:25 pm

Quebec and the Riot Index

The Quebec government is now at it’s second impasse in negotiations with students over tuition  hikes. The Quebec government, which is mired in $159 billion in debt (up from $99 billion in 2004), is attempting to make spending cuts and generate new revenues wherever it can. The proposed 75% increase in tuition that would have left Quebec tuition still the lowest in North America, however, pushed students to strike and led to widespread demonstrations. No doubt, public concern over the widespread allegations of corruption throughout all spheres of Quebec’s provincial politics and industry and the passage of Loi 78 have done little to engender any sympathy for the Quebec government.

Demonstrations in Quebec have had attendance in the hundreds of thousands. The Quebec government seems to be trying to strike a balance on the Riot Index.

I was shocked when some young acquaintances riding the bulls on Bay Street first explained to me the theory of government that prevailed among their set, based on something they called the Riot Index.

Too many riots were bad for business, they allowed, but so were too few – a sign that government had become soft and inefficient. Prudent government squeezed until the mob rebelled, then increased spending just enough to prevent extensive property damage. Optimal social policy was a matter of dialling in the appropriate frequency of riots.

Quebec students and citizens alike believe that Quebec’s austerity measures have gone too far, resulting in over 100 days of demonstrations. Perhaps, the Quebec government hopes that they have managed to strike a balance on the Riot Index between appearing weak on austerity and social unrest – Quebec student unions seem ready to continue tuition negotiations again. On the other hand, if the Quebec government can’t get a handle on corruption, then they may never be able to gain enough trust from Quebec citizens in order to pass the needed austerity measures without provoking new demonstrations.

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May 22, 2012 · 3:08 pm

Poverty and the Ease of Doing Business

s usual, I was reading an article in The Economist, when I saw a statement that I so very often see in international development news stories:

Ethiopia’s doors are not all swung wide open to foreign investment, but rather opened selectively. The regime of Meles Zanawi, the prime minister, is ideological and authoritarian: the ruling party and its allies won 99.6% of seats in parliament in the 2010 elections. Its labyrinthine bureaucracy is the bane of the smallest of private businesses.

Basically, developing countries have horrific bureaucracies that stifle business. So, I wondered, what is the correlation between the ease of doing business and poverty?

Using world bank data, I created a graph to look at the relationship between the World Bank’s Ease of Doing Business Index rank and GDP per capita (adjust for PPP in $US). The results are quite striking.

Every increase in rank in the Cost of Doing Business Index is correlated with a 1.8 percent increase in GDP per capita. It’s no wonder that according to the official World Bank report, 36 of 46 sub-Saharan African countries adopted business friendly reforms in 2010/11.

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May 14, 2012 · 3:48 pm

There Is No ‘Competitive Economy’ On/Off Switch

As anticipated by many observers, elections in Greece ended in stalemate as many Greeks elected to support the Coalition of the Radical Left and other anti-austerity parties over that the two traditional parties, New Democracy and PASOK.

One of the bailout conditions that the leader of the Coalition of the Radical Left, Alexis Tsipras, refuses to meet is to reduce the minimum wage by 22% to make the Greek economy ‘more competitive’.

On the surface, this seems like a reasonable thing to make the Greek economy more competitive. A lower minimum wage and looser labour laws would reduce the cost to hire a new employee, which in turn would promote investment. Of course economies are more complicated than that. Greece’s sorely needed labour market reforms could not possibly be done quickly enough to avoid the harm of austerity.

First of all, Greece, like many OECD countries, has shown evidence of downward nominal wage rigidity. Within the Greek labour market, employees are unlikely to accept a reduction in wages. So, a cut in the minimum wage is, therefore, much less likely to actually reduce wages and make Greek labour less expensive. Greece’s two enormous labour unions  – Greek Civil Servant Union(ADEDY), and the General Confederation of Greek Workers(GSEE)  – will ensure that any minimum wage laws that are passed will be rolled-out as slowly as possible. In fact, today GSEE sent a press release reminding it’s members that their contracts are not subject to new wages until they are up for renewal.

Secondly, it will take years for the government to pass labour reforms. Greece has one of the most heavily-regulated labour markets in the world. It’s not as simple as cutting the minimum wage. Greece was ranked 147th out of 183 countries in terms of labour market rigidity by the World Bank. As an example, it’s currently virtually impossible to even hire workers on contract or temporary basis:

As regards floors under working conditions, these are many (see Demekas
and Kontolemis 1997, Kufidu and Mihail 1999, and Mihail 2003), including rules for compensation for individual and collective dismissals (EPL), for licensing overtime and shift-work, and for approving temporary and part-time contracts. In fact, temporary contracts are only permitted when there are “objective” reasons such as seasonal work, and temporary work agencies are effectively illegal.

The recent elections show that Greece’s political system is now basically paralyzed. Even if Greece, somehow cobbles a government together that can agree to aggressive budget cuts, how could the possibly meat the needed labour market reform conditions?

It’s nice to think that if Greece makes the economy ‘more competitive’ it can avoid the economic harm of austerity measures. But, there is no way for the Greece to become competitive overnight. The process of labour reforms would take years, even if it happens now, as the Greek economy stagnates or worse.

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